Don't pay more for closing costs than you need to.
When you buy a home, you don't just have to pay for the cost of the property. There are significant transaction costs that you'll incur when you get a mortgage and ownership of the property is transferred.
These are commonly called closing costs, and they usually total between 2% and 5% of the value of the home. You won't be able to shop around for the best deal on a lot of these closing costs and will have to pay the price that your lender outlines on your loan estimate. This includes:
- Appraisal fee
- Cost of obtaining your credit report
- Flood determination and monitoring fee
- Tax monitoring fee
But there are other costs associated with closing that you usually can compare prices on to find the most affordable option. And it's generally worth doing because you can often save considerably just by making sure you're getting the best possible deal.
Here are four costs that you can comparison shop for during the purchase of your property.
Before buying a home, it's smart to conduct a home inspection. In fact, you may want the property to undergo multiple inspections, such as a general inspection to assess its overall condition as well as a specialized pest inspection to make sure there are no wood destroying organisms or other infestations.
Inspection fees can vary from one inspector to another, so before you hire an inspector, get several different price quotes. Of course, you don't want to choose your inspector based on price alone since you want someone with the necessary knowledge to find issues with the home.
But if you find multiple qualified inspectors and one charges less than others, there's no reason not to opt for the lower priced service.
2. Survey fees
You will most likely need a survey of your property, either for your own peace of mind or because your mortgage lender requires one.
The purpose of the survey is to identify the boundaries of your new lot and make sure there are no easements, wetlands that are undevelopable, or encroachments on the property.
Surveyors also set their own fees, so it can make sense to get several quotes on price and hire the qualified surveyor that costs the least.
3. Title services
Title services can include a title search and title insurance.
A title search looks for claims on the property, such as tax liens. Title insurance protects you in case something comes up in the future that wasn't found in the original search. Lenders usually mandate that you buy title insurance in order to get approved for a home loan. But even if you're paying cash for the home, you may want this protection.
Depending on where you live, you may be able to negotiate the cost of title services and shop around with different title companies in order to find the most competitive rates.
4. Settlement fees
A settlement agent handles the closing of your sale. They take steps such as collecting the money and arranging for all parties to sign the paperwork. Sometimes, real estate attorneys handle the settlement and in other states title companies take on this task.
Regardless of which type of professional handles your settlement, you are typically able to shop around for different services and negotiate your fees.
Buying a home is expensive under the best of circumstances, so there's no sense in paying more for these services than is necessary. When you decide it's a good time to buy a home, make sure you get multiple quotes for services so you can get the most affordable prices.
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